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Test your basic knowledge |
AP Microeconomics
Start Test
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Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product
Marginal Product of Labor (MPL)
Incidence of Tax
Production function
Consumer surplus
2. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good
Price Ceiling
Monopsonist
Oligopoly
Positive externality
3. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices
Oligopoly
Free-Rider Problem
Market Economy (Capitalism)
Increasing Cost Industry
4. A good for which higher income increases demand
Spillover costs
Economics
Perfect competition
Normal Goods
5. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Total Revenue Test
Economies of Scale
Normal Profit
Average Fixed Cost (AFC)
6. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Constant cost industry
Monopolistic competition long-run equilibrium
Unit elastic demand
Perfectly elastic
7. The marginal utility from consumption of more and more of that item falls over time
Luxury
Constant cost industry
Law of Diminishing Marginal Utility
Subsidy
8. Exists if a producer can produce a good at lower opportunity cost than all other producers
Scarcity
Comparative Advantage
Cartel
Positive externality
9. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0
Marginal Revenue Product (MRP)
Complementary Goods
Determinants of Labor Demand
Perfectly competitive long-run equilibrium
10. The ability to set the price above the perfectly competitive level
Law of Increasing Costs
Economics
Market power
Spillover costs
11. The difference between total revenue and total explicit and implicit costs
Economic Profit
Normal Profit
Constant cost industry
Perfectly inelastic
12. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit
Break-even Point
Determinants of elasticity
Perfect competition
Law of Increasing Costs
13. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital
Fixed inputs
Derived Demand
Perfect competition
Normal Goods
14. The rational decision maker chooses an action if MB = MC
Marginal Analysis
Unit elastic demand
Monopoly
Substitute Goods
15. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic
Short run
Accounting Profit
Incidence of Tax
Perfectly competitive long-run equilibrium
16. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials
Variable inputs
Collusive oligopoly
Law of Supply
Marginal Product of Labor (MPL)
17. Ei = (%dQd good X)/(%d Income)
Long Run
Income Elasticity
Total Revenue
Price discrimination
18. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand
Average Product of Labor (APL)
Determinants of Demand
Monopolistic competition
Complementary Goods
19. The lost net benefit to society caused by a movement away from the competitive market equilibrium
Spillover benefits
Fixed inputs
Monopolistic competition long-run equilibrium
Dead Weight Loss
20. Ed = 8 - infinite change in demand to price change
Perfectly elastic
Law of Demand
Economies of Scale
Marginal Productivity Theory
21. A firm that has market power in the factor market (a wage-setter)
Marginal Product of Labor (MPL)
Collusive oligopoly
Monopsonist
Constant Returns to Scale
22. Ed = 0 - no response to price change
Spillover benefits
Marginal Resource Cost (MRC)
Perfectly inelastic
Determinants of elasticity
23. The practice of selling essentially the same good to different groups of consumers at different prices
Constant Returns to Scale
Law of Diminishing Marginal Utility
Market Economy (Capitalism)
Price discrimination
24. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power
Monopoly
Producer surplus
Four-firm concentration ratio
Least-Cost Rule
25. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus
Natural Monopoly
Specialization
Price floor
Surplus
26. The imbalance between limited productive resources and unlimited human wants
Specialization
Spillover benefits
Oligopoly
Scarcity
27. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)
Allocative Efficiency
Income Effect
Price Ceiling
Oligopoly
28. Product demand - productivity - prices of other resources - and complementary resources
Normal Goods
Marginal Resource Cost (MRC)
Determinants of Labor Demand
Four-firm concentration ratio
29. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.
Break-even Point
Surplus
Dead Weight Loss
Spillover costs
30. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.
Total Welfare
Economic Profit
Perfect competition
Diseconomies of Scale
31. TR = P * Qd
Cartel
Monopoly
Total Revenue
Break-even Point
32. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary
Cross-Price Elasticity of Demand
Normal Profit
Marginal Productivity Theory
Comparative Advantage
33. ATC = TC/Q = AFC + AVC
Perfectly inelastic
Market Economy (Capitalism)
Average Total Cost (ATC)
Diseconomies of Scale
34. All firms maximize profit by producing where MR = MC
Profit Maximizing Rule
Total Revenue Test
Substitute Goods
Complementary Goods
35. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply
Natural Monopoly
Perfectly inelastic
Determinants of Supply
Total Revenue Test
36. Es = (%dQs) / (%dPrice)
Economic Growth
Total Product of Labor (TPL)
Collusive oligopoly
Price Elasticity of Supply
37. Entry of new firms shifts the cost curves for all firms downward
Average Fixed Cost (AFC)
Decreasing Cost industry
Cross-Price Elasticity of Demand
Shutdown Point
38. Ed = (%dQd)/(%dP). Ignore negative sign
Accounting Profit
Price elasticity
Constant Returns to Scale
Marginal Analysis
39. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Variable inputs
Marginal Productivity Theory
Long Run
Price elasticity
40. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good
Constant cost industry
Oligopoly
Spillover benefits
Determinants of Supply
41. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF
Profit Maximizing Resource Employment
Marginal Benefit (MB)
Non-collusive oligopoly
Allocative Efficiency
42. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Dead Weight Loss
Price elasticity
Utility Maximizing Rule
Cross-Price Elasticity of Demand
43. Exists at the point where the quantity supplied equals the quantity demanded
Market Equilibrium
Increasing Cost Industry
Marginal Product of Labor (MPL)
Necessity
44. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity
Demand for Labor
Constrained Utility Maximization
Accounting Profit
Determinants of elasticity
45. The additional cost incurred from the consumption of the next unit of a good or a service
Marginal Cost (MC)
Spillover benefits
Monopoly long-run equilibrium
Determinants of elasticity
46. 0 < Ei < 1
Necessity
Determinants of Demand
Shortage
Allocative Efficiency
47. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK
Marginal Resource Cost (MRC)
Monopoly
Perfectly inelastic
Least-Cost Rule
48. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Law of Increasing Costs
Total Revenue Test
Production function
Price inelastic demand
49. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.
Economic Growth
Producer surplus
Economics
Specialization
50. The difference between total revenue and total explicit costs
Price Ceiling
Monopoly
Necessity
Accounting Profit